Something big is going on at Google (NASDAQ:GOOG). And I have learned that where there is smoke there is generally fire. The biggest clue is the jump in share price which does not seem to correlate with the latest earnings release. Although it was good, it was not that good. Some people think it may have to do with the "mysterious barge" that appeared near San Francisco several days ago. Another one has been spotted in Maine.
Maybe it's really the world's most unorthodox marketing campaign designed to maximize the company's mystique. Maybe it's part of a lavish developers' conference planned in some exotic location, such as an African jungle, the Nevada desert or Antarctica.
CNN reported on Monday that it is an attempt to upstage Apple (NASDAQ:AAPL) with a floating luxury showroom and party deck to market the new Google Glass. However, Google has refused to comment which is fueling the fire. There is a lot of excitement about Google Glass which allows users a hands free way to take pictures and videos using voice commands. It will also produce maps and translate conversations into another language. For $1500, anyone can apply for the opportunity to test the new product. In the past, this was limited to developers.
Google announced Monday that it will invest another 450 million euros ($607 million) over the next several years in a data center that is located in Finland:
The new pledge by the world's No. 1 Internet search company is in addition to 350 million euros it has already spent on the data center, built on the site of paper company Stora Enso's former mill in Hamina, southeastern Finland. Google bought the mill in 2009, turning it into one of its most efficient data centers by taking advantage of the Bay of Finland's chilly seawater to cool its servers.
The company has recently received patents involving the use of seawater at its data centers, which led to more speculation that the "mysterious barges" might be used as international floating data centers.
There is another battle that Google is facing head on. When the company came out with its own version of IP radio earlier this year, the target appeared to be Apple and Pandora (NYSE:P). Most investors agreed that Sirius XM (NASDAQ:SIRI) with its various types of content would emerge unscathed. However, Google has announced that there will be over 20,000 shows in the new Google Play Arsonal via android apps:
Listen to your favorite news, comedy, sports and talk radio shows on your Android phone or tablet. Discover the best of NPR, CNN, Fox, BBC, Freakonomics, Adam Carolla, TedTalks, SModcast, Joe Rogan, Rush Limbaugh, Radiolab and over 20,000 shows, podcasts and live radio. Change the way you listen to radio.
And more android apps are being developed daily. This will be a big problem for Sirius XM and could explain why the share price dropped so suddenly. Sirius is still an excellent company, and as long as Howard Stern stays, many loyal listeners will too. There is also the superior signal that satellite broadcasts compared with internet which can be unreliable in rural areas.
With Google and Apple jumping into streaming radio with such force, Pandora should be struggling. However, the shares continue upward seemingly undaunted. On Monday night ABC News reported that Pandora listeners logged 1.47 billion hours in October, up 18% over last year. However, as the former Sirius XM CEO Mel Karmazin used to say "It's a terrible model compared to the subscription based model at Sirius". Because it costs more to play more music due to royalty payments. The income only rolls in from advertising sales. This is the same free model that Apple is using, but it is making money from selling all of the iDevices the loyals use to listen on.
iTunes Radio has its own built-in listener base which is composed of millions of iDevice users that have either converted to iOS7, or own a new iOS7 product. What it offers is convenience and exclusive early access. Eminem's new Marshall Mathers 2 album has already been available on iTunes Radio prior to its official release on Tuesday:
The coup represents the first time an entire album has debuted on iTunes Radio and will ensure more Apple users than ever make an effort to check out the new streaming service, rolled out with iOS 7. Before now Apple has offered early access to albums via the artist page, rather than iTunes Radio, but it appears from here on in, all First Plays will be introduced within the new platform.
Apple has had a tough year, but with each bit of good news, the shares are slowly rebounding. Many investors are hoping that iTunes Radio will be one of the catalysts to send the shares back over $700.
According to an article in the New York Times, there is a lot of money coming in to Google from overseas via mobile ads. This could be another reason why the stock jumped.
Much of the growth in mobile was initially in the developed world, where ad prices are generally higher. As the use of smartphones and tablets spreads into developing economies, the revenue per user is likely to drop, affecting overall profits unless Google can grow even faster in these markets. For the third consecutive quarter, 55 percent of Google's revenue came from overseas sources.
Tech Giants like Google and Apple have been beating the rest of the market for many years. Even though we use technology at work, it can also be a very cheap form of continuous entertainment. Just look around at all of the people literally tied to their smart gadgets. There is no reason for this pattern not to continue. In my opinion, Apple and Sirius are strong buys. Pandora looks strong, but might be very vulnerable trying to keep up with the big boys. Google looks expensive, but a mysterious catalyst could send it soaring even higher. It will also be the target of shorts which could bring a short squeeze if there is some really big news.
Disclosure: I am long SIRI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.